InvestorQ : How do you see the impact of DLF reducing its debt levels in the June quarter?
Priyanka N made post

How do you see the impact of DLF reducing its debt levels in the June quarter?

Neelam Naik answered.
2 weeks ago

DLF Ltd had reported very healthy quarterly numbers for the period ended in June 2022. However, more than the numbers it was the sharp reduction in the debt levels that was of real importance. The net debt of DLF reduced from Rs2,680 crore in June 2021 to Rs2,259 crore in June 2022. When we talk of net debt, we are referring to that portion of debt that is not covered by the cash and liquid assets in the balance shset. These marketable securities are normally treated as near money since they can be converted to cas at short notice.

Apart from the reduction in debt demonstrated by DLF in the quarter, the top management also affirmed they would explore ways and means to reduce the debt further in the medium term. The positive takeaway for the company is that the completed inventory and receivables from customers against units that have already been sold was much more than the current liabilities. In short, its liquidity an solvency position was extremely comfortable. DLF had already committed to become zero debt a couple of years back itself.

Even if we look at the gross debt of DLF, it ha fallen sharply from Rs4,755 crore in the June 2021 quarter to Rs3,900 crore in the June 2022 quarter. DLF saw sales bookings virtually doubling to Rs2,040 crore during the June 2022 quarter. If you consider the full year, the company estimates that the total sales bookings would be up 10% at Rs8,000 crore. This is sharply higher than the bookings of Rs7,273 crore in the previous fiscal year FY21. The turnaround in housing demand has also helped the DLF story.

An important factor in the DLF story is that the demand for housing was gradually getting consolidated and concentrated towards the large branded real estate names. There is greater accent on good track record of executing projects and market reputation. That is where DLF is benefitting. This has become more pronounced especially after the proliferation of cases like Amrapali group. Due to such unsavoury incidents in the unorganized names, the sales bookings of DLF have grown sharply in the June quarter.

To be fair, there are some risks too. Firstly, there is the case of rising interest rates and a possibility of recession. If people start expecting that the slowdown will impact their finances, then demand for housing may reduce. Generally, under such conditions, people postpone their home purchase decisions. DLF had reported 39% growth in its net profits for the June 2022 quarter at Rs470 crore, while total income was up 22% yoy at Rs1,516 crore in Q1FY23. The numbers don’t show any degree of worry at this point of time.